Nareit's REIT Report Podcast

Consumers remain largely confident about their personal situations, despite a host of broader economic and geopolitical concerns, says Tom O’Hern, CEO of Macerich (NYSE: MAC). That sentiment is fueling sales and leasing volumes across the REIT’s portfolio of retail and mixed-use real estate.

“The resiliency of the American consumer is amazing, and it is once again on display. Shoppers have come roaring back to our centers to shop with a purpose,” O’Hern told the REIT Report.

During the first quarter, sales were 111% of what they were pre-COVID.

“Despite the economic uncertainty regarding inflation that we haven't frankly seen in decades, higher mortgage rates, a very volatile stock market, and the war in Ukraine, American consumers remain largely confident about their own situations,” O’Hern said.

The economy will enter 2022 on a firm footing and should be able to withstand a variety of challenges that have emerged in recent months, providing a backdrop for continued solid REIT performance, says Nareit Senior Economist Calvin Schnure.

Schnure noted that the economic mood has shifted over the last couple of months, reflecting the new Omicron COVID-19 variant, supply chain issues, price spikes, and labor shortages, among other issues.

“Overall, though, the economy is quite sound. It has a lot of strength and should be able to handle these challenges pretty easily in the year ahead,” Schnure said, particularly since many of the current challenges are related to the pandemic and should ease as COVID cases come down.

As for the hot topics of inflation and interest rates, Schnure pointed out that inflation is still very connected to short-term bottlenecks. “We’re going to see continued concern about inflation, which the Fed is going to be watching closely,” he said, with gradual increases in interest rates likely to begin around the middle of next year.

Investors who own their own homes may be taking a limited view of real estate investment, and in turn are missing out on the benefits of owning commercial real estate through REITs, according to Nicole Funari, Nareit vice president of research.

Speaking on the REIT Report, Funari noted that oftentimes homeowners think they are already invested in real estate simply by owning their own home. While that is true, they also need to examine the differences between homeownership and owning commercial real estate, she said.

“They think they are covered in their investment portfolio when we feel that, no, you really are missing out on the benefits of commercial real estate,” especially because a lot of homeowners don’t consider the breadth of commercial real estate asset classes, Funari said.